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Don't expect major breakthroughs in 3rd round of NAFTA negotiations

Canada’s chief NAFTA negotiator is downplaying expectations for major breakthroughs in revising the 23-year-old trade agreement as the third round of talks begins in Ottawa.

“We’re not expecting to see anything radically new” proposed on the so-called rules of origin, one of the key contentious areas, Steve Verheul said as he entered the first day of talks in Ottawa. In particular, he said he didn’t expect specific proposals related to the auto sector. It’s too early to say how things will go in the third round, Verheul said.

The latest talks for a new North American Free Trade Agreement will run through Sept. 27 in the Canadian capital. Ahead of talks, officials were signaling the latest meetings will mostly focus on areas where the three countries already largely agree.

A group focused on financial services was among those meeting on Saturday, according to two people familiar with the talks, who asked not to be identified because the discussions are private. The U.S. in its negotiating objectives calls for Mexico and Canada to open up more market opportunities for American financial firms, and for rules that prevent countries from restricting the cross-border flow of data or requiring that computing facilities be located in a particular country. The U.S. has also called for rules that ensure its partners don’t manipulate their currencies to gain a competitive advantage.

‘Much Progress’

"All the groups are meeting," Kenneth Smith Ramos, Mexico’s chief negotiator, said in an interview in the entrance of the foreign ministry building where talks are taking place. “Our goal is to make as much progress in this round as possible.”

Rules of origin govern how much of a product must be sourced within the NAFTA region to get the trade pact’s benefits -- for autos, for example, it’s currently 62.5%. The subject will be discussed during talks, Verheul said.

U.S. Commerce Secretary Wilbur Ross this week said President Donald Trump’s administration wants a provision added to NAFTA that would require a specific amount of U.S. content in goods traded within North America, calling the rules of origin a key to the entire renegotiation of the pact.

Rules of origin won’t be discussed until Tuesday and Wednesday, according to a copy of the itinerary viewed by Bloomberg. Dispute settlement, another controversial subject, is also set for discussion on the final day. The first day of talks included subjects such as anticorruption, the environment, small and midsize enterprises, and gender, the itinerary says.

Other subjects of discussion include both the telecommunications sector and workers’ temporary entry rules on Monday and Tuesday; other labor provisions Tuesday and Wednesday; and agriculture Tuesday and Wednesday.

A ‘Disaster’

Trump has called NAFTA a “disaster” that has cost the U.S. manufacturing jobs, which he’s vowed to attract back to the country through tougher trade policies. He’s repeatedly threatened to withdraw if Mexico and Canada don’t give the U.S. better terms.

Canadian Prime Minister Justin Trudeau nonetheless struck an optimistic tone when speaking to reporters Friday. “There are strong things that we can do to make the deal more progressive, even better for our citizens in all three countries,” Trudeau said in Toronto. “We have a tremendous opportunity to grow our economies.”

Though discussions will at times be difficult, the three countries know the benefits of the pact are shared, Trudeau said. Some issues can be agreed on immediately, while others will require ongoing discussion, he said.

Asked about the NAFTA chapter related to the environment, Verheul said it’s “doubtful” it could be finalized during the third round of talks. The nations are aiming for a deal by December.

Canada’s ambassador to the U.S., David MacNaughton, said Friday that one of Ottawa’s key issues is preserving the Chapter 19 trade-dispute resolution program that Trump wants to eliminate.

“Getting rid of Chapter 19 and putting everything at the mercy of the U.S. courts -- that is not something that we would envisage as part of this agreement,” he told the Global Business Forum in Banff, Alberta, on Friday. The third round may focus on issues where there is already “substantial agreement,” he said.